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Saudi Aramco eyes Asian opportunities for downstream growth

As Saudi Arabian Oil Co. prepares for an initial public offering, the state-owned company is weighing and executing significant investments in downstream refining and petrochemicals capacity in Asia.

Reuters reported the state-owned company, which said its crude oil production averages 10.2 million barrels per day, plans to nearly double its crude oil refining capacity to between 8 MMbbl/d and 10 MMbb/d and to double its petrochemicals production by 2030.

"We believe we are the last man standing in terms of energy supply," Saudi Aramco senior vice president of downstream Abdulaziz al-Judaimi told Reuters. "Our cost position on the upstream side, our reliability, our location and our infrastructure are all competitive advantages to us."

Saudi Aramco has previously outlined $18 billion worth of planned growth projects throughout the Americas through its subsidiary Motiva Enterprises LLC, but Judaimi's comments focused on growth projects in Asia.

"We believe markets east of the Suez Canal will continue to grow, including the Middle East as well," Judaimi said.

In March, Petroliam Nasional Bhd. and Saudi Aramco entered into two joint ventures that allow for equal ownership and participation in the operations of a 300,000 bbl/d refinery and selected petrochemical facilities being constructed as part of the Refinery and Petrochemicals Development project within Malaysia's Pengerang Integrated Complex.

The facility is scheduled to start up during the first quarter of 2019. Saudi Aramco will provide 50% of the facility's crude feedstock with the option of increasing that share to 70%, while PETRONAS and its affiliates will supply natural gas, power and other utilities. Each party will share off-take rights for the facility's production.

In April, Saudi Aramco signed a memorandum of understanding with a consortium of Indian oil companies including Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd, and Hindustan Petroleum Corp. Ltd. to develop a $44 billion, 1.2 MMbbl/d integrated refinery and petrochemicals complex on India's southwest coast in Ratnagiri.

Judaimi said Abu Dhabi National Oil Co. may take part of its 50% stake in the joint venture.

Having already entered into joint ventures worth $5 billion with China Petroleum & Chemical Corp. and Exxon Mobil Corp. in 2007 to expand an integrated refinery and petrochemical facility in China, Judaimi said Saudi Aramco was exploring three additional projects in the country.

He said Saudi Aramco is in talks with China National Petroleum Corp. to finalize the purchase of a stake in a 260,000 bbl/d refinery in Yunnan and that the company would make the final decision by the end of the year.

By mid-2019, Judaimi expects the front-end engineering on a 300,000 bbl/d refinery to be built by China's Norinco International Cooperation Ltd. to be done, after which his company will make a final investment decision.

Judaimi said Saudi Aramco had also started negotiations for a third facility in China.

Closer to home, Saudi Aramco and Saudi Basic Industries Corp. signed in November 2017 a memorandum of understanding to develop a fully integrated crude oil to chemicals project.

Saudi Aramco expects the $20 billion facility, which would process 400,000 bbl/d of crude oil into approximately 9 million tons of chemicals and base oils each year, to begin operations in 2025, but the company has yet to make a final investment decision regarding the project.